Adoption of innovation: Wood pellet heating system in the renewable residential energy context

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Tampereen teknillinen yliopisto. Julkaisu 884 Tampere University of Technology. Publication 884

Aija Tapaninen

Adoption of Innovation:

Wood Pellet Heating System in the Renewable Residential Energy Context

Thesis for the degree of Doctor of Technology to be presented with due permission for public examination and criticism in Tietotalo Building, Auditorium TB222, at Tampere University of Technology, on the 28^th of May 2010, at 12 noon.

Tampereen teknillinen yliopisto - Tampere University of Technology Tampere 2010

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ISBN 978-952-15-2357-1 (printed) ISBN 978-952-15-2484-4 (PDF) ISSN 1459-2045

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ABSTRACT

Tapaninen, Aija. 2010. “Adoption of Innovation: Wood Pellet Heating System in the Renewable Residential Energy Context.” Faculty of Business and Technology Management. Tampere University of Technology, Tampere, Finland.

Keywords: Adoption; attribute; characteristics of innovation; wood pellet heating; survey

Getting a new idea widely adopted is difficult. For companies, therefore, it is fundamental that customers are willing to adopt the provided idea or a technological system. Understanding customers, their perceptions, and the attributes influencing the decision to adopt is essential. Thus, this research focused on customers of residential heating, particularly wood pellet heating systems.

Accordingly, this research dissects the adoption of innovation in a renewable residential heating energy context, particularly what influences the decision to adopt the wood pellet heating system.

A vast amount of literature on the adoption of innovation was reviewed from the innovation and customer perspectives. To gain information about customers and their perceptions, a survey (N=154) was conducted in 2007. Both quantitative and qualitative methods were used in analyzing the results; in particular, the content analysis method was utilized.

The research results showed that personal attributes influence issues related to the adoption of wood pellet heating systems. In particular, first, men had more perceived familiarity and knowledge than women regarding issues related to the adoption of wood pellet heating systems. Second, age influenced the intention to select a new heating system; the intention to do so was greater in respondents aged 35-44 compared to those aged 25-34. Furthermore, the research demonstrated that information related to wood pellet and related technologies is communicated in several kinds of publications and that communication increased during the observation period, especially during the 21^st century.

In addition, the perceived acquisition factors, i.e., barriers and criteria, of the wood pellet heating system influencing the decision to adopt the system were examined. The factors were primarily categorized according to Rogers’ characteristics of innovation. The categorization showed differences between characteristics of innovation influencing the decision to adopt a wood pellet heating system. In particular, the results demonstrated that relative advantage was the predominant characteristic influencing the decision to adopt these particular heating systems. The combination of theoretical perspectives on the innovation characteristics and the value for customers indicated that perceptions and adoption decision factors interlock with the value for customers.

In conclusion, this research explored attributes influencing the decision to adopt wood pellet heating systems. The research contributes to the adoption of innovation literature by providing multiple findings analyzed by several theories in the context of renewable residential heating systems. Thus, this research can be considered further improvement in the management of innovation and technology research field. Suggestions are provided for managerial practices, energy policy, and future research. Ultimately, this research will guide further research to increase our knowledge.

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ACKNOWLEDGEMENTS –

Making dreams come true!

Joint trips are much more fun than travelling alone. The journey from a student at Tampere University of Technology (TUT) to a Doctor of Technology has taken me about two and half years.

During this time I have come to learn much about research and researching. I retain many fond memories from this journey and I have met many wonderful people whom I now wish to thank for their support and encouragement in helping me to reach my goal.

The starting point of this research was my master’s thesis. Here I would like to express my gratitude to my colleagues and collaborators, Ilkka Uusi-Maahi, Johanna and Hannu Teiskonen, Timo Korpela and Pentti Nyrhinen and also all those who participated in the project.

On gaining my Master of Science in Engineering, I eagerly took up the opportunity of full-time research in the Department of Industrial Management. This was made possible thanks to the help and encouragement of my Professor, Saku Mäkinen, to whom I am greatly indebted. I am also grateful to the members of the Department of Industrial Management, Finnish Doctoral Program in Industrial Engineering and Management and TEKES as well as those other companies for their generosity in financing the research.

The job of researcher entails making new contributions to enlarge our world of knowledge.

However the path to greater knowledge is not always straight forward and sometimes one can lose one’s direction. An experienced guide can be vital for survival! My guide along this path has been my supervisor, Marko Seppänen, Ph.D. whose support and guidance have been critical in keeping my research on course. Thank you, Marko!

I have the honor of being a member in CITER (Center for Innovation and Technology Research) whose objective is to increase the understanding of co-evolution of innovations and of technologies in a society at large. My bold and beautiful colleagues in CITER have taught me much about life as a researcher. In particular, I would like to thank my friends and colleagues Heini Järvenpää and Ozgur Dedehayir for their company and support on my journey through the world of research.

Thanks are also due to Hanna-Kaisa Desavelle, Henri Suur-Inkeroinen and Tomi Nokelainen, Ph.D.

for all those inspiring conversations aimed at making the world a better place. Thanks also go to our present and former team members! I would like to express my thanks to the personnel of TUT, especially Sirpa Järvenpää, Jukka Annala, Juho Kanniainen, Ph.D., Santeri Repo and Alan Thompson for all their help and kindness. I also owe a debt of gratitude to all those other people who have helped me in this endeavor. Thank You!

In addition, I am profoundly grateful to Professor Roland Ortt and Professor Tuomo Kässi for agreeing to review my research for this dissertation. Thank you both for your valuable and constructive comments during the research process!

Of course, there is more to life than only toil and research. I am, therefore, deeply indebted to my beloved family, friends and relatives! Mom Pirjo, Dad Jorma, big brother Asmo and friend Tuula, even though you may be far away, you are forever in my thoughts. Finally, my heartfelt thanks go to you, Heikki, my nearest and dearest. May I share with you the joy of seeing my life’s dream made real? Thank you!

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ALKUSANAT –

Unelmamatkat ovat toteuttamista varten!

Muiden kanssa matkaaminen on mukavampaa. Matkani Tampereen teknillisen yliopiston (TTY) diplomi-insinööristä tekniikan tohtoriksi kesti noin 2,5 vuotta. Sinä aikana opin tutkimuksen tekemisestä ja tutkijana olemisesta, keräsin kasvattavia kokemuksia ympäri maailmaa ja ennen kaikkea sain olla tekemisissä ihanien ihmisten kanssa, joita haluan kiittää seuraavaksi tämän väitöskirjan toteutumisesta.

Väitöskirjani lähtökohdat ovat tekemässäni diplomityössä, josta kiitos kuuluu Ilkka Uusi-Maahille, Johanna ja Hannu Teiskoselle, Timo Korpelalle sekä Pentti Nyrhiselle sekä muille diplomityöhöni osallistuneille henkilöille.

Siirtyminen vastavalmistuneena tuotantotalouden diplomi-insinöörinä tutkijaksi ja jatko- opiskelijaksi teollisuustalouden laitokselle ei olisi ollut mahdollista ilman arvoisaa laitosjohtajaa.

Siis, suuri kiitos professori Saku Mäkinen asioiden tekemisestä mahdolliseksi! Kiitos tutkimukseni rahoittamisesta kuuluu TTY:n teollisuustalouden laitokselle ja Tuotantotalouden tohtorikoulusäätiölle sekä TEKES:lle ja muille projektien rahoitukseen osallistuneille.

Tutkijan työ on uusien asioiden löytämistä pitkälti aikaisemman tiedon pohjalta. Joskus tutkimus tuntuu polkevan paikallaan, joskus sitä löytää itsensä takaisin lähtöpisteestä. Matkalla hyvä opas on tarpeen. Oppaani, ohjaajani, TkT Marko Seppänen on ollut merkittävä väitöskirjaani vaikuttaja.

Ilman yhteistyötämme, hänen ohjeistustaan ja kärsivällisyyttään vastata pieniin ja suuriin kysymyksiini, tätä väitöskirjaa ei olisi. Kiitos Marko!

Olen osa teknologista kehitystä ja innovaatioita tutkivaa tutkimustiimiä nimeltä Center for Innovation and Technology Research (CITER), jonka fiksut ja filmaattiset kollegani ovat opettaneet minulle tutkijana olemisen taitoja. Kiitos Heini Järvenpää ja Ozgur Dedehayir yhteisistä hetkistämme, erityisesti konferenssimatkoillamme! Kiitos Hanna-Kaisa Desavelle, Henri Suur- Inkeroinen ja TkT Tomi Nokelainen maailmaa parantavista keskusteluistamme! Kiitos myös muut entiset ja nykyiset tiimiläisemme! Kiitos TTY:n henkilökunta, Sirpa Järvenpää, Jukka Annala, TkT Juho Kanniainen, Santeri Repo ja Alan Thompson suurista ja pienistä palveluksistanne! Kiitos kuuluu jokaiselle, jonka olen kohdannut tätä väitöskirjatutkimustani tehdessäni! Kiitos Sinulle!

Lisäksi olen erittäin kiitollinen väitöskirjatutkimukseni tarkastajille, suuri kiitos professori Roland Ortt ja professori Tuomo Kässi! Kiitos arvokkaista ja rakentavista kommenteistanne!

Vaikka aivot analysoisivat jatkuvasti, elämä on muutakin kuin työtä. Sydämellinen kiitos rakas perheeni, sukulaiseni ja ystäväni! Äiti, isä, veljeni Asmo ja ystäväni Tuula, vaikka olette kaukana, olette lähellä sydäntäni. Lopuksi, haluan kiittää rakasta avomiestäni, Heikkiä, jokaisesta hetkestä, jonka saan jakaa kanssasi tällä elämäni matkalla. Kiitos!

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In the 2^nd article, Tapaninen is the lead author. Tapaninen collected the empirical data. In addition, Tapaninen was the main designer and writer of the article. A previous version of the 2^nd article was published in the proceedings of The 4^th IEEE International Conference on Management of Innovation & Technology (ICMIT), September 21-24, 2008, Bangkok, Thailand.

In the 3^rd article, Tapaninen is the lead author. A previous version of this article was published in the proceedings of the Third European Conference on Management of Technology (EuroMOT2008), September, 17-19, 2008, Nice, France, in which Tapaninen was the sole author.

Collaboration for the 3^rd publication was an interactive process. In addition, Tapaninen was the main designer and writer of the article.

In the 4^th article, Tapaninen is the lead author. A previous version of the 4^th article was published in the proceedings of the conference of the International Association for Management of Technology (IAMOT2009), April 5-9, 2009, Orlando, Florida, USA. Tapaninen was the main designer and writer of the article. In addition, Tapaninen collected the empirical data. Collaboration for the 4^th publication was an interactive process, in which Tapaninen had the leading role among the authors.

In the 5^th article, Tapaninen is the lead author. Tapaninen was the main designer, analyst, and writer of the article.

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PART ONE: OVERVIEW OF THE DISSERTATION

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1. INTRODUCTION

This thesis includes two parts. The first part is the overview of the dissertation, research that introduces and combines the essential parts of the studies that were published in five peer-reviewed articles. The second part includes the original articles.

1.1. Motivation and structure

Innovations are diffused after the decisions to adopt innovations are completed. However, getting a new idea, even with significant advantages, is difficult and might require several years to become widely adopted (Rogers 2003: 1). Moreover, for many innovations, coming to the mass markets is challenging (Moore 1999; Statt 1997: 25). For companies, therefore, it is fundamental that customers are willing to adopt an innovative idea or a technology that the companies provide.

Therefore, understanding customers, their perceptions, and the attributes influencing the decision to adopt is essential.

According to Rogers (2003), between 49% and 87% of the variance in adoption can be explained in terms of five attributes: relative advantage, compatibility, complexity, trialability, and observability.

However, while there is rather general agreement regarding relevant factors, there is little consensus on the relative importance of the different factors. In addition, many researchers claim that perceived value for the customer has a motivating impact upon willingness to buy (Dodds, Monroe,

& Grewal 1991; Sweeney, Soutar, & Johnson 1999; Zeithaml 1988; Treacy & Wiersema 1993).

The use of customers’ perceptions in the adoption of innovation is based on the assumption that perceptions of customers directly impact intentions; these, in turn, impact behavior (Bolton & Drew 1991).

Furthermore, adopters of innovation differ from each other (Dickerson & Gentry 1983; Mahajan, Muller, & Srivastava 1990). Customers could be categorized based on their differences. However, some customers may decide not to adopt the innovation at all (Dickerson & Gentry 1983). Hence, profiling customers might save costs in developing and promoting the idea with a targeted method for attracting potential customers.

The vast literature on the adoption of innovation highlights the use of adoption attributes. Thus, despite the noticeable prior work on the adoption of innovations in a residential heating context (Mahapatra & Gustavsson, 2008a, 2008b, 2009), there is a lack of academic literature on the attributes influencing the decision to adopt wood pellet heating systems.

Hence, the question, what influences the adoption of innovation, is of practical and academic concern. Accordingly, this research dissects what influences the decision to adopt a renewable residential heating energy system. Thus, the objective of this research is to study the adoption of an innovation in a renewable residential heating energy context, particularly in terms of what influences the decision to adopt the wood pellet heating system. A wood pellet heating system is one option for heating residential houses with renewable energy. Such options are innovated in order to respond to the increased need for renewable energy and in combating climate change.

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The structure of the research is as follows. Initially in the research, the contextual background of the research is described. Second, the research questions and objectives set up the focus of the research.

Third, the settings of the research include a discussion of the general outline of the research and research design and methods. In the review of the literature on adoption of innovation, previous research is first reviewed from an innovation perspective, including the diffusion of innovation, the innovation decision process, and the characteristics of innovation; second, previous research is discussed from the customer’s perspective, including adopter categories and value for customer. In the second chapter, summaries and findings of the articles, i.e., five peer-reviewed and published articles, are described. In the conclusions, after the contribution of the research and discussion sections, an assessment of the research, including reliability and validity, is given. Finally, suggestions for managerial practice, energy policy, and future research are presented.

1.2. Contextual background of the research

Forestry is one of the growing clusters of biomass and bio-fuels as sustainable and renewable energy literature (Kajikawa & Takeda 2008). Recent studies have investigated, for instance, the potential of bioenergy production and forest energy business (Rikkonen 2009; Pätäri 2009). In addition, wood pellets as a renewable energy source have received a fair amount of attention (Järvenpää & Tapaninen 2008).

This section describes the political targets and renewable energy, particularly wood pellets and wood pellet heating. The context is first reported from the global perspective and, second, from the Finnish perspective. The description gives an outline of the contextual background of the wood pellet heating system.

1.2.1. Global perspective

The Worldwatch Institute’s State of the World (The Worldwatch Institute 2009) report raised the following questions: How will climate catastrophe play out in this century? What are the urgent actions that should be taken? Furthermore, the European Commission (EC) has announced several ambitious proposals to cut emissions of greenhouse gases and boost the use of renewable energy (Barroso 2008; EC 2008). According to these proposals, the share of renewable energy will reach 20% in all member states, and the market share of bio-fuels will exceed 10% by the 2020. Thus, limiting climate change and the increasing need for energy are major driving forces in the development of innovative technologies for more sustainable energy production.

However, although the European Union (EU) has enormous biomass resources and expertise in relation to alternative technologies, the EU still faces challenges in accelerating the adoption of bio- energy systems. Economic conditions, expertise, and institutional capacity, as well as supply chain co-ordination, are key barriers to the propagation of bio-energy in Europe (McCormick & Kåberger 2007).

Wood biomass is a renewable recourse that is considered greenhouse gas (GHG) neutral when heat energy is converted properly (Chau et al. 2009). In addition to traditional methods of burning wood as fuel, several new technologies have been developed to increase the use of renewable energy.

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Renewable energy is used to produce electricity and, in the heating energy context, to produce hot and warm water and steam.

Wood pellets are one option for renewable energy in the residential heating context. Wood pellets are small, cylindrical, compressed chips of wood burnt in stoves and boilers (Lappalainen 2007;

Fiedler 2004; Vapo 2004), and are used mainly in domestic heating. Wood pellets are produced at high pressure by extruding ground wood through a mechanical die (Polagye et al. 2007). A densification process of wood pellets consists of three unit operations: drying, size reduction (grinding), and densification (pelletizing). After wet sawdust is dried in a rotary drier, a hammer mill is used to reduce the biomass to a particle size suitable for pelleting. The dry ground biomass is finally compacted in the mill to form pellets. Due to the frictional heat generated during extrusion and material pre-heating, when wood pellets come out of the pelleting machine, they are usually very hot (70-90 °C). To harden and stabilize the pellets, they are cooled. (Magelli et al. 2009) Wood pellets are more expensive than wood residue, since they require extra fabrication processes and transportation (Chau et al. 2009). The overall wood pellet heating system, for instance, for heating single-family houses, typically consists of a boiler or stove, burner, chimney, wood pellet transport system, and storage facility. The wood pellets are transported from storage, using methods such as conveyor screws or suction systems, to a boiler inside the stove. (Fiedler 2004) System refers here to a set of interrelated units that are engaged to accomplish a common goal. Thus, heating the house could be seen as the goal of the wood pellet heating system. Wood pellet technology for residential use is a bio-energy-based heating system (Lappalainen 2007; Fiedler 2004; Heinimö 2008).

However, there have also been some adverse reports on environmental issues and emissions associated with the use of wood pellets, and some critical views have been presented. A few of these topics concern emissions, slagging, the effects of fuel combustion, and burner efficiency (Vinterbäck 2004). Such issues provide topics for future management and engineering research to make wood pellets more attractive and environmentally friendly.

Although wood pellets have been produced since the late 1970s, starting in North America (Vinterbäck 2004), wood pellet technology for residential use is a rather new bio-energy-based heating system (Lappalainen 2007; Fiedler 2004); thus, wood pellet burning technology could be considered an innovative technology in heating systems.

The adoption rates of wood pellet heating systems vary widely across European countries (Fiedler 2004). The EC (2008) has contributed to the spread of wood pellet technology in the global awareness of bio-energy technologies. In Europe, the forerunners of wood pellets use have been Austria, Sweden, and Denmark (Vinterbäck 2004). The production and consumption of wood pellets vary in different countries; for instance, Canada, Austria, Germany, Finland, Russia, and Poland produced more wood pellets than they consumed in 2007. Sweden, the United States, Italy, and Denmark consumed more tons/year wood pellets than these countries produced (Tuohiniitty 2010a), providing a global market for wood pellets. Sweden has been rather large wood pellet market in the consumption and production of wood pellets (Aebiom 2007; Tuohiniitty 2010b).

The difference between European countries is discussed to indicate the importance of active energy politics and the taxation of fossil energy in encouraging development (Aebiom 2007). In Sweden and Denmark, taxation of fossil fuels and subsidies for biomass have made exporting wood pellets

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economical (Alakangas et al. 2009). Hence, despite the forestry potential, Finland has scant use for wood pellets for thermal energy production and they are argued to lacking significant economic incentives (Aebiom 2007).

The literature lacks studies of subsidies and tax policies regarding wood pellet heating. The Finnish Wood Pellet Association (Tuohiniitty 2010) reports some public subsidies for adopting wood pellets and wood pellet heating systems in European countries such as Sweden, Norway, Austria, Germany, France, Great Britain, and Finland. All these countries provide subsidies for investments.

The taxation of other energy sources influences the adoption of the heating system, especially in Sweden and Austria. Sweden and Finland provide reductions in housekeeping taxes. In addition, subsidies for producing renewable energy are provided in Sweden and Germany. (Tuohiniitty 2010) Notwithstanding, Sweden has a wide variation in public subsidies for adopting wood pellet heating systems compared to other European countries. Subsidies for investments are provided for work, material, or system investments. The investment subsidy can be also in the form of a tax reduction.

(Tuohiniitty 2010a) The taxation and subsidies can be sensitive to local differences and changes in time. In addition, the subsidies taxation can be direct or indirect in the residential heating context.

Varied subsidies and promotion have also been reported in increasing the use of wood pellets. As examples of national support, France has a finance law from 2005 for sustainable development, which aims to lower biofuel costs, subsidies for biofuel conversion systems, and high efficiency of technical systems. In Germany, there is the Programme to Promote Renewable Energies, which supports biomass heating systems and in which small-scale wood pellet heating systems are granted. The Swedish energy taxation policy encourages the use of biofuels. (Aebiom 2007) Hence, the subsidies and policies vary in different countries. However, the policies are stated to have an influence on the rate of adoption of the wood pellet heating system (Aebiom 2007). Sweden, interestingly, is remarkable both in producing and consuming wood pellets and has several public subsidies for the adoption of wood pellet heating.

The wood pellet heating system is a substitute for other heating systems, and therefore faces competition. Typical of the factors influencing the competition between wood pellets and other sources of bio-heating energy are investment costs, fuel price development, taxation, and current interest rates and subsidies (Mahapatra & Gustavsson 2008b; Lappalainen 2007; Madlener 2007;

Ericsson et al. 2004). Homeowners assess the heating system–related factors in Sweden with respect to annual cost of heating, investment cost, functional reliability, indoor air quality, security in fuel supply, system automation, environmental friendliness of the system, increases in the market value of the house, low GHG emissions, and time required to collect information (Mahapatra &

Gustavsson 2009, 2008b). Furthermore, Mahapatra and Gustavsson (2009) found a change in customers’ perceptions in the resurvey. Environmental benignity, indoor air quality, system automation, low GHG emission, and market value were perceived to have significantly higher importance compared to the baseline survey. Interestingly, investment cost was perceived as significantly less important in the resurvey, which is explained by investment subsidies in Sweden (Mahapatra & Gustavsson 2009).

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5 1.2.2. Finnish perspective

As a member of the European Union, Finland has committed itself to the EU’s climate and energy targets. The objective of Finland’s national energy and climate strategy is to increase the use of renewable sources of energy and their share of energy consumption (Ministry of Employment and the Economy 2008).

Cold climate and long distances are typical in Finland. Total energy consumption was 1.42 million TJ in 2008 (Statistics Finland 2009a), which consisted of fossil fuels (46%), renewable energy sources (28%), nuclear energy (17%), peat (6%), and others (4%). Wood fuels provide 21.3% of the energy consumption, where 10% comes from black liquor and other concentrated liquors, 7% is wood fuels used in industry and energy production, and 4% small-scale combustion of wood.

(Statistics Finland 2010a) Use of renewable energy sources has increased in Finland in the 21st century (Statistics Finland 2009b).

Moreover, Finland is one of the world’s leading users of renewable sources of energy, especially bioenergy (Juninger et al. 2008). The biomass fuels (total 292.5 PJ) used in Finland in 2007 was black liquor (154 PJ), solid processing industry by-products and residues (73.5 PJ), forest fuels (21.9 PJ), firewood (44.8 PJ), wood pellets (2.0 PJ), and other biomass fuels in total (Alakangas et al. 2009). Hence, biomass resources in Finland are closely related to the forest industry.

Productive forest land covers 66% of the total land area in Finland (Ericsson et al. 2004). Since the yearly growth of forest biomass is equal to approximately 56 million tons of dry biomass, wood forms the major source of biomass for the Finnish economy (Aittomäki et al. 2007). However, the potential overall energy market is estimated to be larger than the annual availability of biomass (Aittomäki et al. 2007).

The industry, transport, and residential sectors are the most important sectors in total energy consumption. Use of renewable energy sources in Finnish residential heating is estimated to increase to 111.6 PJ in 2020 (Alakangas et al. 2009). In 2007, there were about 1.2 million residential buildings including more than one million detached and semi-detached houses, 74,000 attached houses, and 55,000 blocks of flats. In addition, there were fewer than half a million summer cottages in Finland (Tilastokeskus 2010c). Figure 1 shows the distribution of residential buildings by type of heating fuel (%) since 1991 in Finland. Most of the residential buildings have been heated by electricity.

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Figure 1. Percentage of residential buildings by type of heating fuel (%) since 1991 in Finland

(Source: Statistics Finland, 2010b).

The number of residential houses using a wood pellet heating system is estimated to be around 10,000, equivalent to about 1% of all single-family houses in Finland (Piippo, 2007). In Finland, wood pellets are a rather new fuel in space and residential heating since wood pellets were only introduced here in the late 1990s (Heinimö 2008). Since wood pellet production started in 1998 in Finland, production increased to 326,000 tons in 2007 (Alakangas et al. 2009). The total amount of wood pellets used in Finland in 2007 was 117,000 tons, which corresponds to 36% of wood pellet production: 61,000 tons of Finnish wood pellet use were in households and 56,000 tons in medium scale (>25 kW). (Alakangas et al. 2009) The majority of Finnish wood pellets are exported (Heinimö 2008; Alakangas et al. 2009), for instance, to Sweden, Denmark, the Netherlands, the UK, and Belgium (Alakangas et al. 2009).

In Finland, private customers, house corporations, and firms and municipalities can apply for subsidies for adopting wood pellet heating systems (Tuohiniitty 2009). Households, especially with small incomes, can also apply for the subsidy (Tuohiniitty 2009; ARA 2010). In addition, housekeeping costs could be reduced (Tuohiniitty 2009). Moreover, Finland provides investment grants for long-term research into innovative projects and novel sustainable technologies as well as taxation aims to promote renewable energy in Finland. (McCormick & Kåberger 2007)

In conclusion, global awareness of bio-energy technologies has increased rapidly over the past decade. The use of renewable energy has been estimated to have increased in the Finnish residential heating sector (Alakangas et al. 2005). Finland has the potential for by-products of the wood

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Coal, coke 0,8 0,8 0,8 0,8 0,8 0,8 0,7 0,7 0,7 0,7 0,7 0,7 0,6 0,6 0,6 0,6 0,6 0,6

Other, unknown 1,6 1,7 1,7 1,7 1,7 1,8 2,5 3,3 3,2 3,6 3,3 3,3 3,3 3,4 4,0 4,1 4,2 3,9

District heating 8,5 8,6 8,7 8,9 9,0 9,1 9,1 9,1 9,2 9,3 9,5 9,6 9,6 9,8 10,0 10,2 10,3 10,5

Wood, peat 29,3 28,9 28,2 27,8 27,3 27,0 26,4 25,9 25,6 25,0 24,6 24,2 23,8 23,5 22,9 22,4 22,0 21,8

Oil, gas 26,8 26,7 26,5 26,4 26,3 26,2 26,0 25,6 25,4 25,2 25,3 25,0 24,8 24,5 24,1 23,9 23,7 23,5

Electricity 32,9 33,3 34,0 34,4 34,9 35,2 35,3 35,4 35,8 36,2 36,7 37,2 37,7 38,1 38,4 38,8 39,3 39,8

0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 %

Percentage

Residential buildings by type of heating fuel (%) since 1991

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industry, and a large amount of wood pellets has already been produced. However, the majority of wood pellets are exported. To heat a residential house using wood pellets as fuel, a wood pellet heating system is needed. Wood pellet heating systems are rather new in Finnish heating markets and have been rarely adopted compared to other European countries. Thus, to face the competition, the demand-side factors, especially adoption attributes, should be studied. Accordingly, the following section presents the research questions and objectives of this research.

1.3. Research questions and objectives

Besides the contextual driving forces and the development of innovative technologies for more sustainable energy production and utilization, a recurring theme in the literature is the observation that whenever a cleaner or a cost-reducing technology is available on the market, its uptake across households takes several years and in some cases even decades (Battisti 2008). The technology itself and the bundles of services and additional features related to the basic technology affect the acceptance of the system in the market.

In order to develop and market innovations, an understanding of factors promoting and constraining adoption, and also how the factors influence the rate and level of diffusion within different markets and populations, is needed (Tidd & Bessant 2009). A better understanding, for instance from a managerial perspective, of what influences the decision to adopt or reject a wood pellet heating system might help to this system to compete successfully against rivals in residential heating markets. Issues, particularly practical requirements for increasing the number of adoptions of wood pellet heating systems, leaves a considerable need to combine adoption of innovation theories and the attributes influencing the decision to adopt of the wood pellet heating system. Hence, the driving force for this research was a practical interest to study what influences the decision to adopt a renewable residential heating system.

A lot of theoretical work has been done to study the adoption of innovations, as described in the next chapter. Adoption of innovations has been studied through many approaches and perspectives, for instance, in terms of diffusion of innovations (Rogers 2003), from both the demand and supply sides (Tidd & Bessant 2009). Despite the noticeable prior work on adoption of innovations in a residential heating context (Mahapatra & Gustavsson, 2008a, 2008b, 2009), there is a lack of academic literature on the attributes influencing the decision to adopt wood pellet heating systems.

The research question of the thesis has been evolving in recent years as the research has been carried out and articles related to it have been written up. The main research question that has been developed is formulated as follows: What influences the decision to adopt wood pellet heating systems? The research question is rather broad, and too complex to be approached as such; thus, this research applies the customer and innovation perspectives, thus focusing on the demand side, in order to limit the scope of the research. The customer perspective on adoption attributes focuses on personal attributes, i.e., age and gender, in relation to perceived familiarity, knowledge, and intention to adopt; and on perceived barriers and factors influencing the decision to adopt wood pellet heating systems. The innovation perspective focuses here on the adoption of innovation theories, particularly characteristics of innovation (Rogers 2003), value for the customer (e.g.

Woodall 2003), and communication activity. Thus, the research question is divided into five research questions and targets. Answering the five questions posed should identify the attributes of

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customers and characteristics of innovation influencing the decision to adopt wood pellet heating systems. The research questions are initially discussed below.

The first article, i.e. the first paper of the initial publications of the research, focuses on examining whether customers’ personal attributes, i.e., age and gender, have an influence on the decision to adopt wood pellet heating systems. Gender and age are the basic personal attributes of the customers. The target is to examine whether age or gender influence perceived familiarity and knowledge regarding wood pellet heating system issues or the intention to adopt a new heating system. Thus, the first research question (Q1) is formulated as follows: Do customers’ personal attributes influence the decision to adopt wood pellet heating systems?

Publications are one source of information in the residential heating context (Mahapatra &

Gustavsson 2008a); thus, they provide one communication channel (Rogers 2003) or a way for companies to inform customers. Therefore, in the second article, we assess the discussion of wood pellet heating systems through publishing activities in different sources. In addition, communication channels are part of innovation decision process; thus, the communication activity supports researchers’ interest in studying perceived knowledge in the decision to adopt wood pellet heating systems. Moreover, the study attempts to obtain some technology lifecycle indicators to evaluate, at least roughly, the development phase of wood pellet heating systems through publication activity (Watts & Porter 1997). Thus, the second research question (Q2) is formulated as follows: How and in what sequence is information on wood pellet and related technologies communicated in different sources?

The third and fourth articles study adoption attributes from theoretical innovation perspective, and focus on perceived adoption factors, i.e. barriers, as well as criteria and categorization according to characteristics of innovation. The third article categorizes the perceived barriers to acquiring wood pellet heating systems according to characteristics of innovation. Thus, the third research question (Q3) is formulated as follows: What is the categorization of the perceived acquisition barriers of wood pellet heating systems according to characteristics of innovation? A variation in categorization might indicate differences in perceived barriers and in the characteristics of innovation influencing the decision to adopt wood pellet heating systems.

The fourth article first examines perceived adoption criteria affecting the decision to adopt wood pellet heating systems and, second, categorizes perceived factors according to characteristics of innovation. Thus, the fourth research question (Q4) is formulated as follows: What are the perceived adoption criteria for wood pellet heating systems and their categorization according to characteristics of innovation? The research focuses on the concept of characteristics of innovation.

Therefore, the target of the article is to review the characteristics of innovation literature (1986- 2008) and give an empirical determination of the characteristics of innovation as a framework for categorizing perceived adoption criteria. This literature review and determination might firstly indicate the usability of characteristics of innovation as a framework and, secondly, the differences in perceived criteria influencing the decision to adopt wood pellet heating systems.

Finally, the fifth article continues the discussion about factors influencing the adoption of wood pellet heating systems. The target is to analyze the categorization of perceived acquisition criteria according to characteristics of innovation and analyze the results theoretically from value for

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customer perspective. Thus, the fifth research question (Q5) is formulated as follows: What is the value for the customer in the context of categorization of perceived acquisition criteria for wood pellet heating systems according to the characteristics of innovation? The article combines theoretical customer and innovation perspectives with a view to analyzing the results of the categorization.

Overall, the five research questions are somewhat different in nature. The first and the fifth articles relate theoretically to the customer perspective and the second, third, and fourth articles relate theoretically to the innovation perspective. The second article studies publication activity as a communication channel for customers of wood pellet heating systems, thus the second article is the least important in the research. The third and the fourth articles study adoption attributes from a theoretical innovation perspective and focus on perceived acquisition factors, as well as categorization according characteristics of innovation. The fifth article summarizes the categorization of perceived acquisition factors according to characteristics of innovation and theoretical value for the customer, concluding the somewhat qualitative analyses of the results. For the sake of simplicity, all research questions refer to possible adoption attributes influencing the decision to adopt wood pellet heating systems. Figure 2 demonstrates the division of topics for the different articles. All articles are related in some way to both innovation and customer perspectives;

thus, the solid lines illustrate the primary theoretical focus and dashed lines the contextual focus from the perspective of the subject of the article.

Figure 2. Division of subjects of the articles

By answering the research questions and addressing the attributes of customers and characteristics of innovation, this research critically considers attributes influencing the decision to adopt wood

What influences decision to adopt wood pellet heating systems?

Innovation perspective Customer perspective

Perceived barriers

Perceived criteria

Value for customer

Personal attributes

Communication activity

Article 3. Article 4. Article 5. Article 1. Article 2.

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pellet heating systems. In addition, these research questions show the relevance of adoption of innovation research in the context of residential heating systems.

1.4. Settings of the research

Choices have been made in order to answer the challenges posed by the research questions and objectives. Therefore, after discussing the general outline of the research, the research design and the realization of the selected methods are described.

1.4.1. General outline of the research

Identifying a research area may be derived from several sources, for instance, personal interest or experience, theory, the research literature, a question, new developments in society, or a social problem (Bryman & Bell 2007: 82-85). However, research can also be viewed as a series of interlocked, even simultaneous, choices (McGrath, Martin, & Kulka 1982). Here, the main source for the research area was the practical interest in understanding the adoption of wood pellet heating systems. After starting out with a general research area, narrowing down the focus of research may help with developing research questions. Research questions will guide the literature review, research design, and data collection, and also help in analyzing and writing up the data (Bryman &

Bell 2007: 83). Thus, several informal research questions were composed for this research. The practical interests and existing literature provided ideas for questions. However, it may not be possible to answer all the research questions that arise (Bryman & Bell 2007). Therefore, the selections in this research were based on collaboration with wood pellet heating companies. To summarize, the practical aim of this research was to collect information on potential customers and gain their opinions on wood pellet heating technology and services, and particularly to identify the factors influencing the adoption of the wood pellet heating system.

Because of the relevance of research to practitioners, this research can be categorized as business research. In addition, different approaches might be used to explore the research (Bryman & Bell 2007: 4-36). Business research has been commonly distinguished according to quantitative and qualitative research practices, which constitute different approaches to social investigation (Bryman

& Bell 2007: 4-36); in these practices, the use of theory may serve different purposes. In quantitative research, theories provide proposed explanations for the relationship among the variables being tested. In qualitative research, theories may serve as a lens for the inquiry or are generated during the study. In mixed-method studies, researchers employ theories in many ways.

(Creswell 2003) Combining quantitative and qualitative approaches may provide different conclusions (Metsämuuronen 2003: 207-209). In order to come to more robust conclusions, this research applies both quantitative and qualitative approaches.

In addition, other approaches might guide the research. Briefly, with a deductive approach, theory guides the research, so that the researcher begins by testing or verifying the theory. In contrast, with an inductive approach, one outcome of the research will be the generation of a theory to account for past experiences and findings reported in the literature (Bryman & Bell 2007: 11-15; Creswell 2003: 119-141). However, characterizing the nature of the link between theory and research is not straightforward (Bryman & Bell 2007: 7). Rather, this research is the outcome an iterative process, weaving back and forth between data and theory.

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Philosophically, researchers make ontological claims about what knowledge is, and epistemological claims about how knowledge is acquired (Creswell 2003: 6). In other words, ontological issues are concerned with the nature of social entities, for instance, whether social entities should be considered objective entities that have a reality external to the social actor, or whether social entities should be considered social constructions that are built up from social actors’ perceptions and actions. Epistemological issues relate to knowledge about the social world, for instance, whether a natural science model of the research process is suitable for the study of the social world or not.

(Bryman & Bell 2007: 4-36) The traditional approach states that knowledge is justified true belief (Steup 2005). Post-positivism, however, challenges the absolute truth of knowledge and recognizes that we cannot be ―positive‖ about our claims of knowledge when studying the behavior and actions of humans (Creswell 2003: 6-8; Metsämuuronen 2003: 163-166). However, this research is based on the assumption that the customers are able to make adoption decisions and explicitly describe their perceived acquisition factors in relation to wood pellet heating systems. What kind of knowledge can be obtained based on this research is discussed and assessed in the chapter 4.

1.4.2. Research design and methods

Here, the research design and the realization of the methods selected for the research are described.

The research design provides a framework for data collection and analysis. The research design is connected to understanding behavior in specific social contexts and having a temporal appreciation of social phenomena. (Bryman & Bell 2007: 40) Five prominent research designs are the experimental, longitudinal, case study, comparative, and cross-sectional design. A cross-sectional design entails the collection of data for more than one case at a single point of time in order to collect a body of quantitative or quantifiable data in connection with two or more variables, which are then examined to detect patterns of association. Cross-sectional research is associated with social surveys, but could also include structured observation, content analysis, official statistics, and diaries. The most common form of cross-sectional design is social survey research. (Bryman & Bell 2007: 39-55)

A research method is simply a technique for collecting data (Bryman & Bell 2007: 40;

Metsämuuronen 2003: 162-163). Data are collected in connection with variables, which are then examined to detect patterns of association (Bryman & Bell 2007, p. 55-56). A variable is simply an attribute on which cases vary; without variation, an attribute is constant. There is a basic distinction between independent and dependent variables. (Bryman & Bell 2007: 42)

Due the practical outline of the research and the formulated research question, this research focuses on the demand side of the adoption of the innovation, particularly residential customers. Hence, the social survey, and particularly the questionnaire, was selected as a research method in order to collect information on customers and gain understanding of their perceptions and opinions on wood pellet heating technology and services. The survey as the choice for a research method may be challenged on many fronts. The main errors in survey research are sampling and non-sampling errors, even though probability sampling is employed, and data processing errors that arise in the coding of answers. (Bryman & Bell 2007: 204). However, the insights gained from the survey can both make the research better and provide useful insights into the basics of social interaction

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(Krosnick 1999). The original questionnaire could be asked from the author. Population, sample, questions, and inducement are features of the survey; these are discussed below.

Population is the universe of units from which the sample is to be selected (Bryman & Bell 2007:

182). Because of the practical background of our research question, the population of the research could be referred to here as the customers for the wood pellet heating system in the residential heating market in Finland. However, because wood pellet heating systems can be installed for both new and renovated houses, the exact number of people the research covers is vague. Customers might have none or even several houses; either way, they usually include some type of heating system, at least in Finland. Thus, the distinction between homes and second homes, such as summer cottages, in the residential markets is not studied here. If every existing house had a wood pellet system installed, in Finland there would be over one million single-family houses (Central Statistical Office 2007) heated by wood pellets; this provided the limit for the population. However, the limit is skewed in the sense that every single-family house should be heated by only one method.

With the global perspective, wood pellet heating systems could be exported; thus, the population could be all customers who heat their residential houses.

Sample is defined as the segment of the population selected for investigation as a subset of the population (Bryman & Bell 2007: 182). Sample types are random sample, systematic sample, stratified sample, cluster sample, and snowball sample (Metsämuuronen 2003: 31-33). In survey studies, if strict statistical sampling is not feasible, other procedures may be invoked to enhance the representativeness of individuals in the research; for instance, it may be possible to replicate the study with different subgroups of the target population (Calder, Phillips, & Tybout 1981) and a survey could be conducted through representative sampling (Krosnick 1999). We accepted into our sample all adult respondents, regardless of the heating systems they were using because, according to Rogers (2003), previous adoption can lead to continued adoption, or a previous rejection decision can lead to a later adoption decision. Hence, there was no attempt to restrict the survey to actual customers of wood pellet heating for single-family houses, even though this may have given different research results. Of the total number of respondents (N=154), two thirds were men and one third women. Over half (53%) were selecting a new heating system and just under 77% had considered adopting the wood pellet heating system, furthermore, just under 47% of respondents (n=149) were both selecting a new heating system and had considered adopting the wood pellet heating system (Tapaninen 2008), which improves the reliability of the results that are gained from the sample.

In addition, the Housing Expo was considered a suitable venue for the survey, since the event provides a showcase for companies to exhibit their products and services and also to attract customers and gain feedback. The Housing Expo was held between July 13, 2007 and August 12, 2007; over 195,000 visitors attended, which corresponds to 3.8% of the national population of Finland. Visitors to the exhibition are typically interested in housing and house-building technologies and, thus, are likely customers for wood pellet heating.

Another reason that survey method is challenged is that, for instance, different phrasings or formats of questions might yield different results (Krosnick 1999; Schwarz 1999). With questionnaire pretesting, questions that respondents might have difficulty understanding or might interpret

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differently than the researcher intended can be identified (Krosnick 1999) and revised (Bryman &

Bell 2007: 181). Thus, in the current research, empirical data collection was carried out in two parts.

Firstly, the initial design of the survey was pretested (Czaja & Blair 2005). A few clarifications were made after pretesting, for instance, clarifying the phrasing of questions in order to finalize the questionnaire.

Questions usually have some assumptions behind them. This research assumes that residential heating systems may exhibit specific characteristics of adoption (Berkowitz & Haines 1982).

Customers react to the characteristics of heating technology (Berkowitz & Haines 1982), evaluate the value for the customer (Woodall 2003) and perceived characteristics, and decide either to adopt or to reject the system (Berkowitz & Haines 1982; Rogers 2003). Thus, this research assumes that the respondents are able to make adoption decisions and explicitly describe the perceived factors that they consider when deciding whether to acquire wood pellet systems. The research considers that the responses are all equally informative in providing insights into the minds of respondents (Krosnick 1999).

As an inducement to participate, each respondent received a wood pellet brochure worth five euros, which might be considered rather a small inducement compared to the costs of acquiring the wood pellet heating system, which could run to several thousand euros.

In order to analyze the responses, for the comparison of distribution, Pearson’s classical chi-squared test (χ2-test) is used. The chi-squared test is a statistical technique to determine significant differences between two or more series or proportions (Metsämuuronen 2003). The chi-squared test is used to test one argument as the null hypothesis. In every cell, there must be at least one count and expected less than five counts is an optimum (Metsämuuronen 2003). Chi-squared test results under p ≤ 0.01 or p ≤ 0.05 is significant in the selected risk percent. In addition, this research employed a content analysis that can be briefly defined as a systematic, objective, quantitative analysis of message characteristics (Bryman & Bell 2007: 302).

In addition, content analysis is one technique in quantitative research. Rhetorical, narrative, discourse, structuralist or semiotic, interpretative, conversation, and critical analysis are techniques of content analysis. We used an interpretative technique of content analysis that targets the formation of theory from the observation of messages and the coding of those messages.

(Neuendorf 2002) Furthermore, we applied the Krippendorff’s alpha (K-alpha) technique to assess the reliability of multiple classifiers’ evaluations in content analysis. This describes the extent to which independent classifiers evaluate each item and reach the same conclusion (Krippendorff 2004). In this research, K-alpha indicates the extent to which the different classifiers tend to ascribe the same factor to the same category.

In this research, a bibliometrical method was also applied in order to fulfill the targets of the research with publication activity indicators. It is the quantitative study of literatures, and its task is to provide evolutionary models of science and technology (White, McCain 1989). It is defined as a general means for measuring texts and information (Borgman & Furner 2002). Overall, indicators can be devised through questions, the recording of individuals’ behavior, official statistics, or an examination of mass media (Bryman & Bell 2007: 159). Bibliometrics is one approach to measuring mass media. The bibliometric analysis approach includes three measurement

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concentrations: activity measurement, linkage measurement, and impact measurement (Gerdsri &

Daim 2008). However, the life cycle indicators in assessing the phases of green technologies are criticized, that there is no absolutely obvious sequence of communication activity between the sources (Järvenpää & Tapaninen 2008; Järvenpää & Mäkinen 2009). The activity measurement of the communication seeks general descriptive results, and therefore the bibliometrical method is appropriate for providing indicators for the research. Thus, bibliometrical activity measurement is used here to discuss the progression of communication around wood pellet heating systems.

In summary, the research used the survey method to collect data about customers and their perceptions, and the bibliometrical activity measurement method to examine publication activity regarding wood pellet heating systems, so that the methods were somewhat mixed. The methods chosen have limitations, however, in providing the specified empirical results for the research.

Different research approaches and methods could be used in the future studies, or instance, mixed methods research, as a distinct approach, is relatively new in the social and human sciences (Creswell 2003: 209).

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2. LITERATURE ON ADOPTION OF INNOVATIONS

Definitions of the concepts used in this thesis are discussed in the current section in order to set the boundaries for the theoretical background of the research. Definitions describe subjects, as such, but also exclude other subjects (Braun 1998: 8). Thus, definitions might reveal gateways and set boundaries for the research.

2.1. Innovation perspective

The vast literature on adoption of innovations is fragmented and multidisciplinary. This thesis focuses on literature about diffusion of innovations, the innovation decision process, and characteristics of innovation, as described below.

2.1.1. Diffusion of innovations

The diffusion of innovation research began during the 1940s (Rogers 2003: 39). The nine major diffusion research traditions are anthropology, early sociology, rural sociology, education, public health and medical sociology, communication, marketing management, geography, general sociology, and other traditions. Traditionally, marketing managers have been concerned with how to launch new products successfully, the rate of adoption, and how the perceived attributes of an innovation influence the adoption rate. Marketing scholars argue that they provide a useful contribution by helping to identify customers’ needs (Rogers 2003: 39-101). Hence, the diffusion of innovations has been studied using different approaches, focusing on particular aspects, and adopting different methodologies. For instance, economists try to explain past behavior and predict future trends, marketing studies have examined buyer behavior, and development economics has studied the adoption of agricultural innovations (Tidd & Bessant 2009: 351-352). In addition, diffusion of innovations studies include many thematically different discussions. Management issues, for instance, include studies regarding innovation diffusion and technology acceptance (Carayannis & Turner 2006), launch strategy, launch tactics, and demand outcomes (Guiltinan 1999), while the sustainable diffusion of renewable energy technologies is an example of an innovation-focused policy (Tsoutsos & Stamboulis 2005). In energy and fuels, issues that have been studied include housing associations (Egmond, Jonkers, & Kok 2005, 2006b) and the importance of target groups (Egmond, Jonkers, & Kok 2006a, 2006c).

Research on diffusion aims to study what influences the rate and direction of adoption of innovation (Tidd & Bessant 2009: 352). Since the Bass (1969) model was introduced, the diffusion of innovations has been widely studied (Mahajan, Muller, & Bass 1990). Rogers (2003) has defined diffusion as the development in which innovation proceeds through specific channels of communication and members of a social system over time. Hence, diffusion describes how the adoption of the innovation increases over time as the communication of the innovation changes.

Communication, meanwhile, is a process whereby information or ideas are shared and exchanged (Rogers 2003). Thus, four elements are included in the diffusion research: innovation, communication channels, a social system, and time, as described below.

Firstly, the term innovation has many meanings. Innovation can refer to the inventive process by which new things, ideas, objectives, and practices are created; it can mean the new thing, idea, or